The UK Government are bringing in changes to the way holiday pay is calculated from 5th April 2020.

The new change from April 2020 will mean that employers must take into account a 52 week period for variable remuneration, replacing the current 12 week period.

So, what do the changes mean? Fundamentally all employers must look back at the renumeration for a period of 52 weeks from when the holiday is due to begin. This could then span across more than one financial and/or holiday year.

It shouldn’t impact those workers who work regular hours and receive the same renumeration for their working weeks. However, it will affect seasonal and casual staff, those with zero hour contracts and people with varying hours and pay.

What should holiday pay include? The European Court of Justice (ECJ) held that holiday pay must take into account “normal remuneration” such as contractual or regular patterns of overtime, pay allowances and certain commission payments. Fluctuations in pay can lead to higher holiday pay if leave is taken immediately following busy periods and lower holiday pay if it is taken following less working hours.

When should we start to prepare? Consideration needs to be given as to when employers will start the new calculation. For example, the new ruling comes into force on April 5th 2020, but an employer’s holiday year may begin on January 1st 2020.

The current statutory holiday entitlement is 5.6 weeks (28 days paid entitlement) including bank holidays for full time staff and for part time workers, a pro rata equivalent.

Employers are advised to review their variable pay policy to ensure it meets the new ruling.

ACAS are planning to provide new guidance on the planned changes.

If you would like further advice on these changes or any other matters concerning your payroll please contact Sarah Ashton on 01904 464100 or at

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